When recognizing deferred tax assets and liabilities,the income statement approach and the balance sheet approach yield identical results:
A) when enacted tax rates applicable to future periods do not change.
B) when the firm recognizes no valuation allowance on deferred tax assets.
C) Both (a) and (b) are correct.
D) None of these answers is correct.

Question

Quizplus · Accepted Answer

Both (a) and (b) are correct. The income statement approach and the balance sheet approach will yield identical results only if the enacted tax rates applicable to future periods do not change and the firm recognizes no valuation allowance on deferred tax assets.

When Recognizing Deferred Tax Assets and Liabilities,the Income Statement Approach